Before we talk about personal unsecured credit lines, let us first understand what is a line of credit. Basically, a line of credit is a revolving loan which is used to finance seasonal or short-term expenses. It works on the same principle as a credit card.
When you use a line of credit, you are borrowing money and you pay the interest on the outstanding balance each month along with part or full principle amount. Each time you pay bank the principle, the money is freed for future credit lines. Credit lines can be open ended like a standard credit card account or they can be due after a specified term.
Many small businesses use personal unsecured credit lines to finance their company. These lines of credit usually charge a higher rate of interest compared to personal secured credit lines. It you have good credit with your bank, getting personal unsecured credit lines is as easy as calling up your bank and requesting a transfer of funds into your business account. Some banks offer sweep accounts which automatically draw from your line of credit as when needed and this helps to keep interest payments down and you can manage your money better.
When taking personal unsecured credit lines, you are basically exercising and reaping rewards of your years of being a good credit risk. You will, however, be required to have a good credit score and usually banks require customers to a minimum credit score of 700 in order to extend personal unsecured credit lines. The interest rate will be charged depending on your credit score.